|Source: Capitol Pixel|
Here are some quotes worth typing out and putting on the bathroom mirror. That's where many investors find their worst enemy in the investing world.
Fortune magazine’s August 2000 list of “10 Stocks to Last the Decade” included Enron Corp. (which failed), Nokia Oyj (NOK1V) (which fell from $43 to $9.63 during the next 10 years), Nortel Networks Corp. (which filed for bankruptcy protection in 2009) and Broadcom Corp. (which fell from $143 to $36 during the decade after the article).
Beneath the headline “Little Enthusiasm for Equities Among Advisers,” Investment News, a newsletter that caters to investment advisers, said on Jan. 1, 2012, that only 43 percent of advisers planned to increase their clients’ equity holdings, down from 63 percent in 2011. The S&P 500 (SPX), of course, proceeded to go up 13 percent in 2012, the year advisers were more negative. It was little changed in 2011, the year they expected significant gains. (My emphasis)
And then there was arguably the worst market call of the year, made Jan. 23, 2012, by newsletter writer Joseph Granville. He told Bloomberg Television that day that the Dow Jones Industrial Average would decline 4,000 points by year-end. The Dow wound up rising 887 points.
Myron Kandel, founding financial editor at CNN, says there is a way to raise standards. Qualified professionals should be used as sources, Kandel says, and the public should be told how the person’s past predictions have fared. Otherwise, it’s “like evaluating a baseball player without mentioning his batting average,” he says. (My emphasis)Bottom Line
The fact of the matter is that you may get lucky. Listen to 10 gurus and maybe 2 or 3 may be right, or you may buy 2 or 3 or the 4 out of 10 picks that did well. Know going in, however, that there is a mountain of evidence showing that stock-picking skill isn't persistent. Take 10 who did well last year, and the odds are that at least 6 will do worse this year.
Still, as I've mentioned many times, if you want to buck the odds and pursue stock picking/market timing (after all it is great fun!), then consider doing it with at most 10% of your assets.